After examining the studies submitted to the Academy on “lease-to-own arrangements and leasing certificates,” and after listening to the discussions held on the topic with the participation of the Academy’s members, its experts, and a number of jurists, the Academy resolved the following:

Lease-to-Own (ijarah muntahiya bi-t-tamlik)

First: The criteria distinguishing permissible from impermissible models are as follows:

(a) Criterion of prohibition: that two different contracts are concluded simultaneously with respect to the same asset for the same period.

(b) Criteria of permissibility:

1. The presence of two separate contracts, each independent of the other in time, so that the sale contract is executed only after the lease contract, or the presence of a promise to transfer ownership at the end of the lease term. A purchase option has the same legal status as a promise.
2. The lease must be genuine, not a screen for an underlying sale.

(c) Liability for the leased asset rests with the owner, not the lessee; therefore, the lessor bears any loss or damage that affects the asset, unless it arises from the lessee’s misconduct or negligence, and the lessee bears nothing if the benefit is lost.

(d) If the contract includes insurance for the leased asset, the insurance must be cooperative and Sharia-compliant rather than commercial, and its cost is borne by the owner-lessor, not the lessee.

(e) The rules of leasing apply to the contract throughout the lease term, and the rules of sale apply once the asset is purchased.

(f) Non-operational maintenance costs are to be borne by the lessor, not the lessee, for the duration of the lease.